Goldman Sachs has revised its forecast and no longer expects the Federal Reserve to cut interest rates until at least late 2026 [1].
This shift in outlook suggests that the U.S. economy remains more resilient than previously anticipated, potentially keeping borrowing costs higher for longer. Such a delay impacts everything from mortgage rates to corporate investment strategies across the global market.
Economists at the firm said stronger-than-expected jobs data was a primary driver for the change [1]. Robust employment figures suggest the labor market is not cooling enough to justify a reduction in the current restrictive monetary policy. This stability in the workforce allows the Federal Reserve more room to maintain high rates to combat inflation without risking a sudden economic collapse.
Beyond domestic employment, geopolitical tensions have introduced new volatility into the inflation forecast. The firm said that heightened inflation risks are linked to the Iran-Ukraine conflict, which has contributed to higher energy prices [2]. These external pressures complicate the Federal Reserve's efforts to bring inflation down to its target level, as energy costs often ripple through the entire supply chain.
There is some variation in the specific timing of the projected move. While some reports state the firm no longer expects any cuts in 2026 [1], other data indicates the first cut is now projected for December 2026 [2]. The company's chief operating officer said the Fed may not cut interest rates until late 2026 [4].
These revisions reflect a broader uncertainty regarding the trajectory of global inflation and the persistence of U.S. economic strength. By pushing back the timeline, Goldman Sachs aligns its view with a scenario where the central bank prioritizes price stability over immediate growth stimulation.
“Goldman Sachs has revised its forecast and no longer expects the Federal Reserve to cut interest rates until at least late 2026.”
The revision by Goldman Sachs indicates a shift in market expectations toward a 'higher for longer' interest rate environment. By citing both strong domestic labor data and geopolitical instability, the firm highlights how external shocks like the Iran-Ukraine conflict can offset internal economic cooling, forcing the Federal Reserve to maintain a restrictive stance to prevent a secondary inflation spike.
